EMERGING MARKETS-Brazil equities mixed as corruption probe weighs

Published 12:17 PM ET Mon, 5 March 2018
Reuters

SAO PAULO, March 5 (Reuters) - Brazil's benchmark Bovespa index was roughly flat on Monday, underperforming some other major Latin American equities markets despite general market optimism, after new corruption revelations sent shares in food companies plummeting. Early on Monday, Brazilian federal police said they arrested the former chief executive of food processor BRF SA on charges that he and other executives were aware that the company committed fraud in trying to avoid food safety checks.

Police said the charges were part of a new phase in the so-called 'weak flesh' corruption investigation, which caused havoc last year on the sector and temporarily closed export markets to Brazil, the world's largest beef and chicken exporter. By afternoon, BRF shares had dived 15.8 percent, taking 227 points off the Bovespa. Shares of asset manager Tarpon Investimentos SA, whose largest investment is BRF, fell 18 percent, their largest ever drop, after the arrest of Pedro Faria, former chief executive at BRF and currently a partner at Tarpon. Shares in Brazilian food companies JBS SA and Marfrig Global Foods SA also took a hit, falling 5.2 percent and 1.7 percent, respectively. As a whole, the Bovespa was trading up 0.14 percent in the afternoon, as the index was supported by shares of state-run oil major Petroleo Brasileiro SA, known as Petrobras, whose preferred and common shares had jumped 2 percent and 2.3 percent, respectively. Various sectors such as telecoms, finance, and consumer discretionary were in the black due to general optimism regarding the possibility of monetary easing in Brazil and positive developments in global commodities markets. That helped take the bite out of the food sector losses, even as the Bovespa significantly underperformed equities in Mexico and other nearby markets. "Here we have more and more the perception of a market converging toward a new cut in the Selic (interest) rate," said Vitor Suzaki, an analyst at Lerosa Investimentos. "And abroad there's also the improvement of commodities, which is buoying emerging markets."